U.S. economy gains 115,000 jobs in April

Unemployment dips to 8.1% as more people stop looking for work

WASHINGTON (MarketWatch) — The U.S. economy created just 115,000 jobs in April as hiring slacked off for a second straight month, according to the government’s latest employment figures.

The unemployment rate edged lower to 8.1% from 8.2%, but it fell because more people stopped looking for work. Some 342,000 people dropped out of the labor force to mark the second decline in a row, the Labor Department said Friday.

“The unemployment rate is falling for all the wrong reasons,” said Ryan Sweet, senior economist at Moody’s Analytics. The end of extended jobless benefits in many states may have contributed to the decline, he said.

The U.S. was expected to add 163,000 jobs in April, according to a survey of economists polled by MarketWatch.

Job growth in the last two months has been cut almost in half compared to the winter months of December through February, suggesting businesses may have turned cautious again. New hires averaged 252,000 in the winter months but have tapered off to an average of 135,000 in April and March.

Many economists believe an unusually warm winter pulled job creation forward at the expense of hiring that normally takes place in the spring.

Yet the slower rate of hiring in April is just one of many recent economic reports that have raised concerns about the whether the recovery is softening. The downturn in Europe and slower growth in China have exacerbated those concerns.

On the brighter side, job growth was revised modestly higher for both March and February. The increase in employment in March was revised up to 154,000 from an initial reading of 120,000. And the gain in February was revised up to 259,000 from 240,000.

In New York, the Dow Jones industrial average fell by more than 150 points and oil prices dropped below $100 a barrel.

In Washington, Republicans quickly launched a broadside on the White House, whose policies they blame for the slow recovery since the end of the 2007-2009 recession. Republicans have made the economy the centerpiece of their campaign to oust President Barack Obama at the polls in November.

“It’s a terrible and very disappointing report...This is not progress,” said Mitt Romney, Obama’s Republican challenger in the fall.

The White House argues its policies prevented a deeper downturn and they point out that the U.S. has added 4.25 million private-sector jobs over the past 26 months.

“It is critical that we continue the economic policies that are helping us dig our way out of the deep hole that was caused by the severe recession that began at the end of 2007,” said Alan Kreuger, senior White House economic adviser.

Most economists believe the U.S. is on a track to add an average of 150,000 to 200,000 jobs a month in 2012, consistent with a national growth rate of about 2% or slightly faster. They believe hiring will spring back in a few months after the recent lull, which would be good news for the President and his chances of reelection.

Neil Dutta, an economist at Bank of America/Merrill Lynch, said the hiring trend in the U.S. is lower than it seemed during the winter months but not as low as it appears now.

“It’s not 115,000 new jobs a month,” he said, “but it’s not 250,000, either.”

Yet the U.S. needs to create about 250,000 jobs each month over a year or two to put back to work all the people who lost their jobs during the recession and pull down the unemployment rate. In past recoveries, hiring often increased at an even faster pace.

The latest quarterly survey of executives by the Corporate Executive Board found little change in hiring plans among big companies. Some 38% say they plan to add workers in the next 12 months — up from 36% in the first quarter — while 32% expect to trim employees from payrolls.

Inside the report

The biggest increase in jobs last month took place in the category of professional services: Employment rose by 62,000, including a 21,000 gain in temporary jobs. Temp work often leads to full-time jobs.

The average work week for April was unchanged at 34.5 hours, while average hourly earnings rose 1 cent to $23.38.

Wages have only risen 1.8% over the past year, less than the rate of inflation. Slow inflation-adjusted wage growth is one of the main reasons the economy hasn’t grown faster. Workers have less to spend and cannot save as much.

Last month, 12.5 million Americans were officially classified as unemployed, down 173,000 from March. The so-called U6 jobless rate, which includes discouraged jobseekers, was flat at 14.5%.

The labor-force participation rate, meanwhile, fell to 63.6% from 63.8%, the lowest level in more than 30 years. That’s a negative sign because it usually means people think jobs are harder to find.

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